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F5 to Buy Shape Security for $1B; Francois Locoh-Donou Quoted

Jeff Brody
Francois Locoh-Donou

F5 Networks (Nasdaq: FFIV) has agreed to acquire Santa Clara, Calif.-based Shape Security for approximately $1B in cash as both companies aim to help government and enterprise customers secure digital experience with integrated offerings.

The boards of directors of both companies have approved the transaction, which is expected to conclude in the first quarter of calendar year 2020, F5 said Thursday.

Shape’s application protection technology is designed to distinguish good traffic from bad by leveraging cloud-based analytics and assessing the flow of data from the user into the application. The platform seeks to help public and private sector organizations avoid sophisticated bots or fraudulent transactions.

“We will deliver end-to-end application protection, which means revenue generating, brand-anchoring applications are protected from the point at which they are created through to the point where consumers interact with them—from code to customer,” said Francois Locoh-Donou, president and CEO of F5.

He added Shape’s artificial intelligence and machine learning capabilities will expand F5’s application services portfolio and ability to protect clients’ apps in multicloud environments.

Derek Smith, co-founder and CEO of Shape, and his fellow executives will serve in key management positions at F5 upon the deal’s completion.

The acquisition will accelerate F5’s move to software as a service- and software-driven business model and is expected to be accretive to the company’s free cash flow per share within a year of the deal’s closing and reach non-GAAP earnings per share within two years of the transaction’s completion.

F5 said it will use cash on hand and Senior Unsecured Term Loan A worth $400M to fund the transaction.

The Seattle-based company will continue to operate Shape in Santa Clara.

Foros and JP Morgan served as F5’s financial advisers in the transaction, while Skadden, Arps, Slate, Meagher & Flom acted as the company’s legal adviser. Qatalyst Partners advised Shape on the deal’s financial aspect and Sidley Austin served as the firm’s legal counsel.

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